Informix hits rock bottom

On the side of Route 101, just a few hundred feet from database software
maker Oracle's front door, is a
billboard that Informix Software
has for years used as a platform for hurling barbs and mild insults at
the database software behemoth. Now Oracle might have the last word.

The sputtering company, an up-and-coming threat to database software
market leader Oracle just a few short months ago, has seen its revenues
tumble, its accounting practices challenged, and its stock price plummet
in recent weeks.

All of this has investors and analysts are wondering: When will the bad news stop?

The question has led to a top-to-bottom revamping of the company's management team, as well as a lot of deep thought by the company's board and incoming CEO Robert Finocchio, on what strategy the Menlo Park, California-based company should tackle next.

Analysts agree that Informix (IFMX) has decent technology and a
top-notch customer list. But management needs to get its act together, and it needs to do it soon.

For example, today's announcement that Informix has received a $40 million equity investment from Fletcher International represents news both good and bad. Although money is never a bad thing, the company said the infusion was needed to help get the company "back on track toward profitability." (See related story)

"They need to articulate and execute a
strategy that is cohesive and timely. Once they come up with a strategy,
it will still be two or three quarters before they can execute it," said
Randal Chin, an analyst with Alex.
Brown.

"It's going to be a tough road back to recovery. They have good
technology, but they have executed very badly," Chin said.

The company's main downfall is an unwavering belief that if Informix could
offer cutting-edge technology, in the form of an object-relational
database, that users would come. In droves.

Object-relational databases can store and manage new multimedia data,
such as audio and video clips, along with standard row-and-column text
and numbers that relational databases have always handled. Additionally,
object-relational systems can manage Java components and other software
building blocks that standard relational systems are not designed to
recognize. That's one reason why proponents say O-R databases are much
better suited to handling Web data than older technology.

The problem is few users
really see a need for the technology or even understand what it can do
for them.

"They assumed there would be demand [for Universal Server]
without finding out what the end-user wanted," said Brian Eisenbarth, an
analyst with Collins & Company. "Object technology can be very powerful, but
the user has to be educated in what it can do for them," he said.

The market in time may prove Informix, and former CEO Phil White, to
be visionaries. Object-relational databases do have several advantages
over relational systems, such as the ability to handle multimedia
information without breaking a sweat.

That fact has not been lost on Oracle, which has added some object
support to its freshly shipped Oracle 8 relational database server.
Oracle is "developing things that Informix was working on six to nine
months ago," said Eisenbarth.

And both Microsoft and Sybase--which is rebuilding after its
own technological stumble and financial setback--are dipping their toes
into the object-relational pond.

But the fact remains that database buyers are notorious for their
conservatism, and they just weren't ready to buy. "Informix emphasized
the wrong product at the wrong time," said Chin.

Now management needs to reevaluate its place in the market and assure
customers that it can survive, before more sales walk away. "It's a
question of marketing now, to make sure the public knows their products
are valuable and know what they have to provide," said Eisenbarth.

Finocchio, who earned a reputation for hard-nosed management at
networking equipment maker 3Com, is
seen by many analysts as the right man at the right time for Informix.
"Finocchio comes from outside of the software industry. Right now for
Informix that could be a good thing, since he could provide a fresh
perspective," said James Pickrel, an analyst with Hambrecht & Quist.

But those conservative database buyers aren't easily assuaged. "One
thing about this industry is that buyers are very sensitive to a
company's problems, because a database is a long-term commitment. A
company says, if we're going to spend $200,000 on a database system,
we're going to go with the best. Sybase and Informix did damage to their
reputations and it takes a long time to recover," said Eisenbarth.
"Oracle has taken advantage of that situation."